The State Treasury has issued the Baltic states' first sustainability bonds, raising funding of €600mn. The eurobonds had a maturity of eight years, with a yield of 0.263% and a fixed coupon rate of 0.25%, the Latvian Ministry of Finance said.
Sustainability bonds are bonds where the proceeds will be exclusively applied to finance or re-finance a combination of both green and social projects. The ministry said the bonds are issued “to support sustainable development in Latvia and to raise funding for measures and priorities aimed at mitigating the negative impacts of climate change, moving towards climate neutrality, and increasing prosperity”.
With this borrowing, Latvia will face “global climate challenges, with the support of sustainable financial instruments strengthening the path to the development of a climate-neutral and socially responsible economy, which aims to address the most effective long-term climate, environmental and social policies and their impact on future generations”.
The establishment of a bond framework, which is a mandatory condition for the issuance of sustainable bonds, was ensured by a working group chaired by the Ministry of Finance, representing the Ministry of Environmental Protection and Regional Development, Ministry of Economics, Ministry of Agriculture, Ministry of Transport, Ministry of Welfare, Ministry of Interior, Ministry of Education and Science and the Cross-Sectoral Coordination Centre.
It is planned to extend the resources received as a result of the issuance of sustainability bonds to the state budget expenditure carried out and planned in 2020-2022 for ensuring environmentally friendly transport, the preservation of Latvian forests, waters, biodiversity, reducing inequalities and poverty, and other measures aimed at achieving sustainable development objectives.
The leading banks of sustainability bond issuance were Barclays, BNP Paribas, and Credit Agricole CIB. The bonds were purchased by more than 110 investors, mainly asset managers from European countries, with investors' total demand above €2.5bn.